THE CITY OF GLOUCESTER CITY v. BEAZER HOMES CORPORATION

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

THE CITY OF GLOUCESTER CITY,

a municipal corporation of the

State of New Jersey,

Plaintiff-Appellant,

v.

BEAZER HOMES CORPORATION,

Defendant-Respondent.

January 23, 2014

Argued December 3, 2013 Decided

Before Judges Alvarez, Ostrer and Carroll.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4067-10.

John B. Kearney argued the cause for appellant (Kearney and Associates, P.C., attorneys; Mr. Kearney, on the briefs).

Michael F. Brandman and Charles Heuisler argued the cause for respondent (Weiler & Brandman and Archer & Greiner, P.C., attorneys; Mr. Brandman, on the brief).

PER CURIAM

This dispute arises from a failed redevelopment agreement (RA) and sales agreement (SA) between plaintiff the City of Gloucester City (Gloucester), the would-be seller, and defendant Beazer Homes Corporation (Beazer). Summary judgment dismissing Gloucester's complaint for damages was granted to Beazer on August 24, 2012. For the reasons that follow, we affirm.

I

The real estate in dispute is a waterfront parcel of land known as the Vanguard Vinyl property (VVP), owned by Gloucester since approximately 1995. On June 20, 2003, Gloucester entered into an "EPA Brownfield Project Grant Agreement," with the United States Department of Environmental Protection (USDEP), revised on August 19, 2005, and January 12, 2006. That agreement provided grant funding in the amount of $200,000 towards the cost of the cleanup and remediation of the site, formerly used for the manufacture of vinyl siding.

Gloucester and Beazer entered into the two agreements in dispute on July 6, 2006. The RA specified that when the two documents were in conflict, the RA terms were to control. In the SA, Beazer agreed to purchase the land for $150,000.

With regard to Gloucester's remediation of the site, however, the RA provided as follows:

The City has been conducting certain cleanup activities on the [VVP] on a voluntary basis pursuant to an EPA Brownfield Pilot Project. Pursuant to the Pilot Project, the City has advertised for the remediation and demolition of the improvements on the [VVP] site in accordance with the Bid Specifications attached hereto as Exhibit "G", which is also referenced in the Agreement of Sale and herein as the City Work. The City will award a contract for the work under the Bid Specifications to the lowest responsible bidder and shall manage the completion of the City's Work in compliance with the requirements of the EPA Brownfield Pilot Project Grant Agreement. As a condition to the purchase of the [VVP] and as a requirement of this [RA], Beazer shall be responsible to reimburse the City for all reasonable costs and expenses incurred as part of the completion of the City's Work. Beazer shall make payment to the City within thirty (30) days of submission of the charges incurred by the City. The City shall cause, at no additional cost to Beazer, that Beazer be added as a party to whom all work performed by the City's consultants is certified. For purposes of calculating the amount of payment to the City for the cost of remediation and/or demolition, the proceeds of any grant assistance received by the City shall not be a credit or off-set to the amounts due from Buyer under this Agreement[.]

[Emphasis in original.]

Consideration for the purchase, then, included not just the $150,000 cash payment, but reimbursement for the costs of cleanup.

The SA provided that closing would take place "on the 1st day of October, 2006 .. .or 30 days after the issuance of a final No Further Action letter [(NFAL)1] from the New Jersey Department of Environmental Protection [(NJDEP)] [] and the receipt of all final unappealable governmental approvals which [we]re necessary to construct [Beazer's development]. . ., whichever [wa]s later." However, "[i]n the event closing d[id] not occur prior to December 31, 2006," Beazer alone was given the "right to extend the Closing Date until September 30, 2007[,] in consideration for monthly payments to [Gloucester] . . . in the amount of Five Thousand Dollars."

Both agreements provided that time was of the essence. In fact, the SA stated that "all times for performance of [the SA] [we]re of the essence, and that [the parties] must . . . perform what [wa]s required of them within the time limits set by [the RA], or else be in default." The time for performance was not explicitly defined in the RA.

The SA also provided for Beazer's reimbursement for the cost of cleanup, in terms virtually identical to those contained in the RA:

The City has been conducting certain cleanup activities on the [VVP] on a voluntary basis pursuant to an EPA Brownfield Pilot Project. Pursuant to the Pilot Project, the City has advertised for the remediation and demolition of the improvements on the [VVP] site in accordance with the Bid Specifications attached as Exhibit "F" to the [RA], which is also referenced in the [RA] and herein as the City Work. The City will award a contract for the work under the Bid Specifications to the lowest responsible bidder and shall manage the completion of the City's Work in compliance with the requirements of the EPA Brownfield Pilot Project Grant Agreement. As a condition to the purchase of the [VVP] and as a requirement of the [RA], Beazer shall be responsible to reimburse the City for all reasonable costs and expenses incurred as part of the completion of the City's Work. Beazer shall make payment to the City within thirty (30) days of submission of the charges incurred by the City. The City shall cause, at no additional cost to Beazer, that Beazer be added as a party to whom all work performed by the City's consultants is certified.

Although the agreements granted Beazer the option to extend the closing date in one-month increments between December 31, 2006, and September 30, 2007, Beazer never did so. As of September 30, 2007, Gloucester had not obtained an NFAL from NJDEP or final unappealable government approvals for the project.

The record is devoid, inexplicably, of any reference to any steps taken by either party with regard to the sale after 2006 until August 14, 2009, when Gloucester wrote to Beazer stating that Beazer "ha[d] abandoned the project and [wa]s in default of its obligations under the agreement," and that, as a result, "Beazer owe[d Gloucester] substantial funds [for] costs incurred in work [that Gloucester] had done in furtherance of the agreement." On January 25, 2010, Gloucester again wrote to Beazer, stating that "Beazer [wa]s in default," and that Beazer "ha[d] 30 days to cure the breach" before Gloucester would take legal action. On August 13, 2010, Gloucester filed the within complaint against Beazer seeking a judgment that would "properly and justly compensate it for [Beazer's] breach of the [RA] plus attorney fees and costs."

The dismissal of that complaint is the subject of this appeal. Gloucester's points are as follows:

I. [THE LAW DIVISION JUDGE] ERRED IN GRANTING DEFENDANT'S CROSS MOTION TO LIMIT DAMAGES.

II. THE CITY IS ENTITLED TO REIMBURSEMENT.

III. THE TRIAL COURT FAILED TO UNDERSTAND THE TERMINATION OF THE AGREEMENT.

We choose to address only the last point, which, expansively viewed, is Gloucester's central argument as to the reasons summary judgment should not have been granted. Since we affirm, the issues of reimbursement and damages thereby become moot. We do not reach Gloucester's other issues.

II

In rendering his summary judgment decision, the Law Division judge observed that, if the language in the documents were read as Gloucester contended, the time frame within which it had to complete its obligations pursuant to the contract, including obtaining the NFAL that was a condition precedent to closing, would be "infinity." Relying upon Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588 (App. Div.), certif. denied, 183 N.J. 591 (2005), the judge reasoned to the contrary that, where time is of the essence, "the party receiving such notice must close on that date or forfeit the benefit of the bargain." He went on to state:

[I]t's clear that [Gloucester] did not meet its obligation to come to the closing table. And the agreement itself . . . states . . . that the closing will occur on the 1st day of October 2006 at or before ten o'clock a.m. or 30 days after the issuance of a final [NFAL] . . . , and the receipt of all final unappealable governmental approvals . . . whichever is later. In th[e] event closing does not occur prior to December 31st, '06 Beazer shall have . . . the right to extend the closing . . . date until September 30th, '07 . . . .

There is language . . . that indicates that the closing time is of the essence. . . .

I do find that the agreement itself expired, . . . and the benefit of the bargain that . . . the parties would be entitled to [was] lost when closing did not occur. . . . I cannot find that in this instance [] Beazer would be obligated to pay expenses . . . demanded by . . . Gloucester . . . as a result of these agreements . . . .

III

Summary judgment is warranted where the pleadings and evidence "show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). This standard has been traditionally expressed as requiring a "determination whether there exists a 'genuine issue' of material fact that precludes summary judgment." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). The motion judge must:

consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. The judge's function is not himself [or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.

[Ibid. (alteration in original) (internal quotation marks omitted).]

We employ the same standard when reviewing the grant of summary judgment. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We ask if "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Brill, supra, 142 N.J. at 536 (internal quotation marks omitted). In the absence of any genuine issue of material fact, we then decide whether the trial court's application of the law was correct. Walker v. Atl. Chrysler Plymouth, Inc., 216 N.J. Super. 255, 258 (App. Div. 1987).

Our review of a trial court's interpretation of a contract is de novo. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med. & Physical Therapy, 210 N.J. 597, 605 (2012). This is because such issues of interpretation are questions of law. Ibid. Essentially then, we review the application for dismissal of the complaint seeking reimbursement for remediation expenses, whether inclusive of costs prior to the execution of the contract or not, as if anew.

The Supreme Court has described contractual conditions precedent as follows:

The intention of the parties controls in the making and in the construction of contracts. The parties may make contractual liability dependent upon the performance of a condition precedent . . . . Generally, no liability can arise on a promise subject to a condition precedent until the condition is met. . . . A condition in a promise limits the undertaking of the promisor to perform, either by confining the undertaking to the case where the condition happens, or to the case where it does not happen.

[Duff v. Trenton Beverage Co., 4 N.J. 595, 604-05 (1950).]

With regard to time of the essence provisions, we have explained:

While a closing date contained in a contract is often viewed as formal rather than essential, if the contract itself provides a clear understanding that time is of the essence, then it is well-settled that prompt performance is essential, and the date contained in the contract for closing will be strictly enforced by a court of equity.

[Marioni, supra, 374 N.J. Super. at 603 (citations and internal quotation marks omitted).]

Generally, when a time of the essence provision is clearly agreed to by the parties, one party's "failure to appear and close at [the appointed time will] constitute[] a forfeiture." See id. at 602-03. Thus, under time of the essence agreements, adherence to the closing date is a condition precedent to performance. Cf. Restatement (Second) of Contracts 224, 225 (1979) ("A condition is an event, not certain to occur, which must occur . . . before performance under a contract becomes due. . . . [T]he non-occurrence of a condition discharges the duty when the condition can no longer occur.").

IV

Gloucester argues that the judge erred when he found that Gloucester's failure to obtain the NFAL or necessary governmental approvals discharged Beazer's obligation to close. In particular, Gloucester contends that, under the agreements, its procurement of the NFAL or governmental approvals was not a condition precedent to Beazer's obligation to close or to Beazer's commitment, as part of the purchase price, to reimburse it for remediation expenses.

Beazer responds that, under the agreements, there were numerous conditions precedent to its obligation to perform, including Gloucester's procurement of the NFAL within a specific timeframe. Beazer cites to New Jersey case law and the Restatement (First) of Contracts for the proposition that an obligation premised on a condition need only be performed in the event that that condition is satisfied.

From that premise, Beazer further asserts that the agreements conditioned its obligation to reimburse Gloucester on its purchase of the VVP; and, in turn, that the agreements conditioned its obligation to purchase the VVP on Gloucester's procurement of the NFAL. Finally, Beazer maintains that Gloucester's two-year delay in sending any notice of the alleged breach, in the face of language making time of the essence, was a tacit acknowledgment that Beazer's obligation to close was discharged.

As we have said, the SA provided that closing would take place either on October 1, 2006, or thirty days after the issuance of an NFAL and final unappealable governmental approvals necessary for the development of Beazer's project, whichever was later. Read literally, as Gloucester urges, this could impose upon Beazer an obligation extending into infinity to perform regardless of the date of Gloucester's receipt of an NFAL and final unappealable governmental approvals. Yet, this would be an absurd result, and contracts will not generally be read in that manner. See Booth v. U.S. Fid. & Guar. Co., 3 N.J. Misc. 735, 737 (Sup. Ct. 1925) (noting that a "court [is] bound by the terms of [a] contract," unless giving effect to the plain meaning of the words "would bring about an unreasonable or absurd result"). Additionally, to have structured the agreement in such a fashion would have been to vest in Gloucester total control over the closing date, contrary to the provision that time is of the essence.

A reasonable construction is to find that the relevant language expresses the parties' understanding that if closing did not occur on October 1, 2006, then September 30, 2007 became the final operative date at Beazer's discretion. This is because the condition precedent is modified as to duration by three other contractual provisions.

First, under the SA, Beazer alone was given the "right to extend the Closing Date until September 30, 2007 in consideration for monthly payments to [Gloucester] . . . in the amount of Five Thousand Dollars." Hence the SA made clear that the extension of the closing date to September 30, 2007, was the last possible date for closing. Beazer never extended the date, however, nor made monthly payments.

The parties' failure to close by this date, presumably because Gloucester had not obtained an NFAL, typically would not have discharged Beazer's obligation to close. This, because "[e]quity deems time provisions in a land contract to be formal rather than essential." See Stamato v. Agamie, 24 N.J. 309, 315 (1957). In other words, such a provision, standing alone, would have been a promise rather than a condition precedent. See Liberty Mut. Ins. Co. v. President Container, Inc., 297 N.J. Super. 24, 34 (App. Div.), certif. denied, 149 N.J. 406 (1997).

However, turning to the second and third provisions, both agreements also "specifically" stated that time was of the essence. See Paradiso v. Mazejy, 3 N.J. 110, 114 (1949), superseded by rule on other grounds, Rule 4:26-1, as recognized in Rogan Equities, Inc. v. Santini, 289 N.J. Super. 95, 105 (App. Div.), certif. denied 145 N.J. 375 (1996). The RA stated that "[t]ime [wa]s of the essence." The SA stated that "all times for performance . . . [we]re of the essence." These provisions transformed the otherwise "formal" time for performance into an "essential . . . date" that "w[ould] be strictly enforced by a court of equity." See Marioni, supra, 374 N.J. Super. at 603 (citation and internal quotation marks omitted).

Hence Gloucester's failure to obtain the NFAL by the outside date of September 30, 2007, relieved Beazer of the obligation to close. This "failure to appear and close . . . constituted a forfeiture," see Marioni, supra, 374 N.J. Super. at 602, or, the non-occurrence of a condition precedent that occasioned a discharge, see Duff, supra, 4 N.J. at 604-05; Restatement (Second) of Contracts 224, 225.

Beazer's obligation to reimburse was explicitly tied to the completion of the sale, and was, in fact, a portion of the purchase price. As the RA stated, "[a]s a condition to the purchase of the [VVP] and as a requirement of this [RA], Beazer shall be responsible to reimburse [Gloucester] for all reasonable costs and expenses incurred as part of the completion of [Gloucester]'s work."

Curiously, in Paragraph 8(b) of the SA, Gloucester acknowledged that it had an obligation to submit written charges incurred as the remediation work was completed. The record is devoid of any mention of even one such submission.

In Paragraph 8(c), Beazer was vested with the primary responsibility to oversee the work. Similar to Gloucester's apparent failure to submit charges to Beazer, the record makes no mention of any involvement by Beazer in any work undertaken to remediate the property after the agreements were signed.

To summarize, Gloucester's failure to fulfill the conditions precedent to the sale relieved Beazer of the obligation to close. In the absence of the fulfillment of those conditions, the only reasonable interpretation of the deadlines in the contracts are that they expired by their own terms and that Beazer therefore had no obligation at all to reimburse.

The motion for summary judgment was properly granted, even construing the facts in the light most favorable to Gloucester, the nonmoving party. That Gloucester had to complete its work to at least the point of defined benchmarks, as a condition precedent to closing, is spelled out in the documents in dispute.

1 An NFAL is defined as: "[A] written determination by the [NJDEP] that based upon an evaluation . . . of an area of concern . . . and any other investigation or action the [NJDEP] deems necessary, there are no discharged contaminants present . . . at the area of concern . . . ." N.J.S.A. 58:10B-1. Pursuant to N.J.S.A. 40:55D-22(b), a municipality can only conditionally approve a development plan until such time as the development has secured all non-municipal governmental approvals, which, presumably, include an NFAL.